Distinguish between collusive and non-collusive oligopoly.
Distinguish between collusive and non-collusive oligopoly. Explain how the oligopoly firms are interdependent in taking price and output decisions.
2 Answers
Collusive Oligopoly is one in which the firms cooperate with each other in deciding price and output. Whereas,
Non-Collusive Oligopoly is one in which the firms compete with each other.
The firms are interdependent because each firm takes into consideration the likely reactions of its rival firms when deciding its output and price policy. It makes the firm dependent on other firms. The firm may have to reconsider the change in the light of the likely reactions.
Collusive oligopoly is a form of market in which few firms form a mutual agreement to avoid competition. They form a cartel and fix the output quotas and the market price. Leading firm in the market is accepted by the cartel as a price leader. All the firms in the cartel accept the price as fixed by the price leader.
Non-collusive oligopoly is a form of market in which few firms. Each firm has its price and output policy is independent of the rival firms in the market. The entire firms enable to increase its market share through competition in the market.